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Abstract:

Systems and methods for enterprise energy automation are provided. An
enterprise energy automation system determines an energy performance
model for each of a plurality of building automation systems using data
extracted from the plurality of building automation systems. The
performance models for each of the plurality of building automation
systems are used in conjunction with pricing information received from an
energy supply and delivery system to determine an optimum operating
strategy for the plurality of building automation systems.

Claims:

1. An enterprise energy automation system comprising: a communications
interface configured to conduct electronic data communications with a
plurality of building automation systems in a group of buildings and with
an energy supply and delivery system; and processing electronics
communicably connected with the communications interface, wherein the
processing electronics are configured to: (a) monitor data from the
energy supply and delivery system; (b) extract data from the plurality of
building automation systems; (c) determine an energy performance model
for each of the plurality of building automation systems using the
extracted data from the plurality of building automation systems, wherein
each energy performance model comprises a speed of response to a load
shifting strategy and a magnitude of load shifting available; (d) use the
energy performance model for each of the plurality of building automation
systems to build a portfolio-wide energy performance model defining a
flexibility of the portfolio of buildings on both a day-ahead and
real-time basis; (e) determine an optimum operating strategy for the
plurality of building automation systems using the portfolio-wide energy
performance model and pricing information received as a part of the
monitored data from the energy supply and delivery system; and (f) send a
bid to the energy supply and delivery system for an energy supply and
delivery system product as a part of the determined optimum operating
strategy.

2. The enterprise energy automation system of claim 1, wherein the data
from the energy supply and delivery system and the data from the
plurality of building automation systems are received via the Internet.

3. The enterprise energy automation system of claim 1, wherein the data
from the energy supply and delivery system and the data from the
plurality of building automation systems are received continuously.

4. The enterprise energy automation system of claim 1, wherein the data
from the plurality of building automation systems includes meter data.

5. The enterprise energy automation system of claim 1, wherein the data
from the plurality of building automation systems includes occupancy
data.

6. The enterprise energy automation system of claim 1, wherein the
communications interface is further configured receive local weather data
for the group of buildings, wherein the processing electronics are
further configured to apply the local weather data to the energy
performance model for each building as a part of the determination of the
optimum operating strategy.

7. The enterprise energy automation system of claim 1 wherein the data in
(a) comprises status of one or more of the following: a transmission
line, a generating plant, and a distribution system.

8. The enterprise energy automation system of claim 1, wherein the
processing electronics are further configured to: (g) receive an
acceptance of the bid from the energy supply and delivery system; and (h)
execute the determined optimum operating strategy.

9. The enterprise energy automation system of claim 8, wherein the
processing electronics are further configured to: (i) provide
compensation for the plurality of buildings.

10. The enterprise energy automation system of claim 9, wherein the
compensation comprises a share of utility tariff demand savings.

11. The enterprise energy automation system of claim 9, wherein the
compensation comprises a share of ESP demand charge savings.

15. An enterprise energy automation system comprising: a communications
interface configured to conduct electronic data communications with a
plurality of building automation systems in a group of buildings and with
an energy supply and delivery system; and processing electronics
communicably connected with the communications interface, wherein the
processing electronics are configured to: receive data from the plurality
of building automation systems and pricing information from the energy
supply and delivery system; build a portfolio-wide energy performance
model for the plurality of building automation systems using the data
from the plurality of building automation systems; determine an optimum
operating strategy for the plurality of building automation systems using
the portfolio-wide energy performance model and the pricing information
from the energy supply and delivery system; and send a bid to the energy
supply and delivery system for an energy supply and delivery system
product, wherein the bid is based on the optimum operating strategy.

16. The enterprise energy automation system of claim 15, wherein the
portfolio-wide energy performance model defines a flexibility of the
group of buildings on both a day-ahead and real-time basis.

17. The enterprise energy automation system of claim 15, wherein the
processing electronics are further configured to: determine an energy
performance model for each of the plurality of building automation
systems using the data from the plurality of building automation systems,
wherein each energy performance model comprises a speed of response to a
load shifting strategy and a magnitude of load shifting available.

18. A computerized method for enterprise energy automation, the method
comprising, at a computer: receiving data from a plurality of building
automation systems in a group of buildings and pricing information from
an energy supply and delivery system; building a portfolio-wide energy
performance model for the plurality of building automation systems using
the data from the plurality of building automation systems; determining
an optimum operating strategy for the plurality of building automation
systems using the portfolio-wide energy performance model and the pricing
information from the energy supply and delivery system; and sending a bid
to the energy supply and delivery system for an energy supply and
delivery system product, wherein the bid is based on the optimum
operating strategy.

19. The method of claim 18, wherein the portfolio-wide energy performance
model defines a flexibility of the group of buildings on both a day-ahead
and real-time basis.

20. The method of claim 18, further comprising: determining an energy
performance model for each of the plurality of building automation
systems using the data from the plurality of building automation systems,
wherein each energy performance model comprises a speed of response to a
load shifting strategy and a magnitude of load shifting available.

Description:

CROSS-REFERENCE TO RELATED PATENT APPLICATIONS

[0001] The present application is a continuation of U.S. patent
application Ser. No. 12/270,308 filed Nov. 13, 2008, which is a
continuation of U.S. patent application Ser. No. 11/107,222, filed Apr.
15, 2005, which claims the benefit of U.S. Provisional Application No.
60/562,691, filed Apr. 16, 2004, all of which are hereby incorporated by
reference in their entireties.

BACKGROUND

[0002] It would be desirable to provide a process for leveraging the
convergence of new technologies and market metrics to provide major
energy economies to commercial buildings.

SUMMARY

[0003] The present invention is defined by the following claims, and
nothing in this section should be taken as a limitation on those claims.

[0004] By way of introduction, the preferred embodiments described below
relate to enterprise energy automation. In one preferred embodiment, a
method for enterprise energy automation is provided. In another preferred
embodiment, a method for delivering ancillary services to an energy
supply and delivery system by a group of buildings is provided. In yet
another preferred embodiment, a method for integrating an energy
automation system is provided. Other preferred embodiments are also
provided.

[0005] The preferred embodiments will now be described with reference to
the attached drawings.

BRIEF DESCRIPTION OF THE DRAWINGS

[0006] FIG. 1 is a schematic of an energy automation process of a
preferred embodiment.

[0007] FIG. 2 is a diagram of an energy automation system of a preferred
embodiment.

[0008] FIG. 3 is a block diagram of an energy automation system of a
preferred embodiment.

[0009] FIG. 4 is a graph of building electrical load.

[0010] FIG. 5 is a graph of savings for a 1 MW commercial customer.

[0011] FIG. 6 is a graph of hourly energy price distribution in New York
City Summer 2002 weekdays.

[0012] FIG. 7 is a graph of weekday load profile for New York City Summer
2001.

[0013] FIG. 8 is a graph of degree days versus month for Chicago Midway.

[0014]FIG. 9 is a graph of intra-day energy price volatility distribution
for New York City Summer 2002 weekdays.

[0026] FIG. 21 is a graph of NYISO day ahead east regulation prices on
summer weekdays.

[0027] FIG. 22 is a graph of 2001 PJM spinning reserve activation.

[0028] FIG. 23 is a graph showing that transmission congestion into New
York City is significant and volatile.

[0029] FIG. 24 is a graph showing frequency of high prices occurring in
PJM.

[0030]FIG. 25 is a graph showing savings for a 1 MW commercial customer.

DETAILED DESCRIPTION

Introduction

[0031] By way of introduction, the preferred embodiments described below
are directed to Enterprise Energy Automation, which is the process for
leveraging the convergence of new technologies and market metrics to
provide major energy economies to commercial buildings. Enterprise Energy
Automation provides the means by which customers, suppliers, and
deliverers include all components of energy cost incurrence on both sides
of the meter in their investment and operating decisions. Weekly, daily,
hourly, and minute-to-minute, through Energy Automation, economies of 20
to 40% can be continuously and relentlessly wrung out and distributed.
Enterprise Energy Automation enables the realization of previously
untapped economic and reliability benefits--benefits long concealed by
the utility-customer tariff relationship. Enterprise Energy Automation is
particularly advantageous in major metropolitan areas with persistently
high energy supply prices. Target customers are commercial buildings--and
their energy service providers, building automation contractors,
utilities, and regional operators.

[0032] This detailed description will first describe the components and
operation of a presently preferred system for implementing Enterprise
Energy Automation. The detailed description will then describe the
products, services, and long-term option values that can be provided
through Enterprise Energy Automation

Enterprise Energy Automation System

[0033] Turning now to the drawings, FIG. 1 is a schematic of an energy
automation process of a preferred embodiment. As shown in this schematic,
an energy automation process interacts with a complex energy supply and
delivery system 10 and complex commercial building technology and
operations 20. The term "EnergyConnect" used in this figure and in this
description refers to the name of the assignee of the present patent
application. Although "EnergyConnect" (or "EcI") is used in these
preferred embodiments to refer to the entity providing the energy
automation system/process, it should be understood that other entities
can implement the disclosed embodiments, with the appropriate licenses.

[0034] Referring again to the drawings, FIG. 2 is a more detailed diagram
of the energy automation system. As shown in FIG. 2, the energy supply
and delivery system 10 and a commercial building BAS (building automation
system) 20 communicates with a control center 30 via a network 40 (here,
the Internet). The energy automation system integrates an intelligent
software solution, a network, a gateway and graphical user interface, and
a supply and delivery system interface. The intelligent software solution
analyzes and executes various cost avoidance and revenue-enhancing
strategies, performs data collection and monitoring, and comprises
benefit/risk sharing protocols, all to balance energy and comfort
decisions. The network 40 allows each building to communicate over secure
high-speed internet or customer intranet with the national control center
30. The gateway and graphical user interface is located at each building,
streamlining and easing the communication, information, and control
functions with BAS and building management. The supply and delivery
system interface is a direct, reliable, and secure communication with
utilities, distribution service entities, regional transmission
organizations, and other supply entities.

[0035] The control center 30 comprises a platform with intelligent
adaptive software that electronically integrates the energy
production/delivery systems and customers' energy using equipment. More
specifically, the platform acquires and delivers reliable real-time
electronic data and control signals. Data transfer will occur in near
real-time and with reliability consistent with that presently required
for energy system and energy market operations. Most of the necessary
energy system and energy market data is readily available, as it is
already used for system operation. Some energy system data, e.g. LMP, is
becoming available with the advent of independent system operators (ISO).
The necessary customer data is available from large buildings with BAS,
and is gradually becoming available from smaller buildings as BAS prices
drop and hourly metering is deployed by utilities. The platform also
decides the optimum operation of a portfolio of customers' equipment. The
platform dispatches the portfolio in a manner that (1) maximizes profit
from among several competing energy system and energy market
opportunities, (2) dependably performs all energy system reliability
functions, and (3) maintains building comfort. Decisions are required in
several time-frames. For example, electric capacity may require annual or
monthly commitment. Electric system ancillary services may require
day-ahead commitment. Operating to economy energy prices requires daily,
hourly, and real-time decisions. The platform also performs accounting
and billing consistent with protocols and provides feedback, monitoring,
and reporting.

[0036] The platform enables powerful "products" that reduce supply and
delivery costs and increase commercial building, BAS, and communications
systems values by reducing current and expected energy expense and by
reducing pressure on suppliers and distribution systems. These products
will be discussed in more detail below. Preparatory to providing initial
Energy Automation products and services, EnergyConnect provides services
to assure that customer facilities are doing the basic blocking and
tackling of energy management. They include "tuning" HVAC and BAS
equipment to meet design performance, installing "enterprise" energy
reporting software, upgrading to state-of-the-art BAS, as necessary to
execute Energy Automation strategies and including project finance if
preferred, and controlling energy use against utility tariffs. These
basic services provide several benefits, including creating additional
energy savings for many customers, as much as 10%.

[0037] Turning again to the drawings, FIG. 3 is a block diagram of an
energy automation system of a preferred embodiment. This system comprises
an electric system markets and operations interface 50 and a building
interface 60. The electric system markets and operations interface 50
comprises a weather database 51, an REP database 52, an ECI REP/QSE
interface 53, an ECI QSE interface 54, a market database 55, and an APX
market database 56. The building interface 60 comprises a module that
encodes building instructions 62, a module that provides a graphical view
of building operations and expected system/weather conditions 64, a
building database 66, and a customer building interface 68. The system
also includes an REP QSE module 70, an ISO 80, a QSE module 90, a module
that determines day ahead building performance capability 100, a module
that determines optimum day ahead building and portfolio operation 110,
and a module that estimates value 130.

[0038] The building control and portfolio optimization software will
determine the portfolio building operation that maximizes value against
market, supplier, and utility prices. The diagram depicts a "day-ahead"
process. The "day-ahead" strategy will anticipate and reflect (a)
expected conditions for the next day and (b) prior long-term or seasonal
commitments to each building's supplier or to the ISO 80. A similar
"short-term" process will continually update and communicate an optimum
strategy for the next few hours. The "short-term" strategy will
anticipate and reflect (a) actual conditions as they unfold during the
day and (b) prior long-term and short-term commitments to each building's
supplier or to the ISO 80. Both the "day-ahead" and "short-term"
processes entail two steps.

[0039] The first step is to determine day ahead building performance
capability. This determines load shifting and response capability of each
building based on, for example, (a) an ability to execute pre-defined
strategies that have been defined and tested in advance consistent with
(1) building and HVAC system character and (2) BAS and communications
capability, (b) expected weather (temperature, humidity) and occupancy,
(c) historical performance under similar weather and occupancy
conditions, and (d) as modified by a building engineer, current status
input. In this embodiment, there are several pre-defined strategies in
the building database 66. These include day-ahead shifting to market
price (e.g., shift load from afternoon (high prices) to morning (low
prices) to early morning (even lower prices) in order to minimize energy
expense with day-ahead notification), Chicago shaping and imbalance
(similar to "shifting" but in illiquid Chicago hourly market), real-time
shifting (a variation on "shifting," i.e. also be prepared to shift the
same day, within the afternoon, in response to electric system
events/prices), spinning reserve (be prepared to drop significant load,
10±minutes, randomly, approx. 10× during summer, between noon
and 6 pm), demand limiting (augment "shifting" strategy with peak demand
control), and curtailment (extended peak curtailment, approx. 5 hottest
days, commitment made from portfolio).

[0040] Step one determines a model for each building that is one input to
the optimization model. For example, to facilitate a predefined day ahead
load-shifting strategy, the model considers magnitude and timing leeway
for load shifting, inefficiency of precooling in advance of need,
efficiency of cooling during lower ambient temperature hours, and
delivery tariff constraints. The building models are then combined to
create a single model of the building portfolio, also for input and
analysis by the optimization model.

[0041] The building model defines the current flexibility of a building
and of a building portfolio to (a) shift HVAC-related electrical load and
(b) curtail lighting and other loads--to accommodate hourly energy
prices--on both a day-ahead and real-time basis. Similarly, the model
defines the current ability of a building and of a building portfolio to
provide ancillary services to an ISO.

[0042] FIG. 4 is a graph of building electrical load. In this graph, kW is
a function of outdoor dry bulb T, outdoor dew-point T, solar load, wind
speed, internal electrical equipment and lighting load, hour, and season.
The chillers have a slower response and longer duration, i.e. primary
basis for load-shifting and secondary basis for ancillary services. The
pumps/AHU have fast response and are able to shift load around if
integrates to (approx.) zero over small time period, i.e. ancillary
services.

[0043] ECI considers several building characteristics in mapping building
electrical equipment and loads to electric system markets and operations.
These characteristics include speed of response (e.g., kW/minute or
kW/second), advance notice required (e.g., seconds, minutes, hours, day),
duration of response (e.g., ability to accommodate 10 minute, 15 minute,
hourly, or multi-hour thermal-related load-shifts), time interval of
response (e.g., ability to shift thermal-related load back 1 hour, 2
hours, etc.), magnitude of response (e.g., add a second dimension to each
of the above parameters; how many kW does that speed, notice, etc. apply
to), inefficiency/efficiency of response (e.g., define efficiency loss
incurred by change from historical HVAC operation that tracks building
thermal load or efficiency gain obtained by operating HVAC equipment in
hours with more favorable ambient conditions), and other thermal
character (e.g., thermal inertia, recovery ability).

[0044] Modeling of buildings for various purposes is well developed.
Modeling of a building in a manner that reveals the characteristics
listed above is not well developed. The ECI building model will adapt
existing building model technology to this purpose. The ECI building
model is also characterized by inverse (the input and output variables
are known and measured, and the objective is to determine a mathematical
description of the system and to estimate the system parameters), dynamic
(use transfer functions where the thermal mass of a building is
sufficiently significant to delay the heat gains or losses), and system
level (a model of the entire building, not an assembly of component
models of the HVAC system. "Component" modeling may reside in the
building automation systems to more efficiently adapt building loads to
hourly and subhourly electric market prices and operations control
signals). (The descriptions of inverse and dynamic stated above are from
ASHRAE Handbook, Chapter 31, "Energy Estimating and modeling Methods").

[0045] Step two determine optimum day ahead building and portfolio
operation by determining optimum operation of the building portfolio and
optimum operation of each stand-alone building. Inputs to the
optimization model include, for example, (a) a model of each building and
of the building portfolio and (b) market prices for energy, capacity, and
ancillary services (or alternative supplier price/value indicators).
Optimization criteria include ST revenue maximization, LT revenue
maximization (ISO program enrollment in advance of year or season), LT
margin maximization (margin takes into consideration whether capital or
opportunity costs are incurred), option value (for example, putting
thermal energy in the bank in order to be able to take advantage of
short-notice price spikes), and minimum threshold (reflect minimum value
or margin of error, and diminishing returns).

[0047] Portfolio optimization enables mapping of sophisticated buildings
to sophisticated (not necessarily high margin or high revenue) uses in
order to maximize portfolio revenue. For example, the most versatile
buildings may provide spinning reserve services while also providing
"portfolio reserves" to backup multiple other portfolio services being
sold off of other buildings. Building sophistication or versatility may
be defined in terms of 1) communications speed and reliability; 2) RT/ST
intra-day flexibility; 3) building thermal inertia or recovery ability;
4) thermal storage; and 5) building engineer preferences. Such criteria
may be satisfied through staged optimization. First, optimally shift each
building's thermal load independently to accommodate hourly prices, day
ahead (DAH), while respecting demand features of energy supplier contract
and utility delivery tariff. Second, modify DAH for LT commitments &
associated reserves. Third, modify DAH to anticipate ST products &
associated reserves (involving product bids to ISO, anticipating awards
or not resulting from such bids, and anticipating a fallback ST
load-shifting strategy in the event that a bid is not successful).
Fourth, modify DAH for 3-hour ahead events and price changes. This model
eventually anticipates and takes advantage of others' independent,
non-portfolio building actions.

[0048] Eventually, the basic precooling strategy becomes the
baseline--around market prices and processed directly by the supplier and
customer. EnergyConnect then determines the optimum change to the
scheduled load, as needed to provide portfolio services, and pays the
customer for the value of such portfolio service. (Under this scheme,
suppliers and their customers will have a disincentive to falsify this
new baseline because ECI may well decide not to change the baseline
schedule. Regarding distributed analysis/decision-making, (a) ECI
optimization software estimates basic load shifting strategy to
accommodate hourly prices, (b) building BAS determines actual response to
hourly energy prices (that is, for those buildings assigned to a simple
price-based, load shifting strategy, ECI provides a price profile to each
building BAS system and the precise load shifting strategy is determined
by a local algorithm that can more efficiently and accurately adapt to
real-time building conditions), and (c) the ECI building model learns
building capability over time, so that estimates get better over time.
Also, the BES/RRS bid generator 120 is an example of a market application
that could be better developed (and brought to market faster) if
outsourced or codeveloped by an ECI partner with hands-on commercial
experience in the ERCOT market.

[0049] The following paragraphs will describe other components of the
system shown in FIG. 3.

Estimate Value Module 130

[0050] A simple algorithm to indicate to building engineers in real time
the value of actions that they are being asked to take with their
building systems. For example, this can be a specific dollar value or a
"high," "moderate," "low" designation.

BES/RRS Bid Generator 120

[0051] This software performs two functions. First, as an input to the
optimization software 110, it estimates "winning" bid prices. Second, for
transmittal to the QSE 90, it executes a bid strategy. In production
mode, estimates of "winning" bid prices are based on an analysis of
awards, including recent history and under similar seasonal, weather, and
ISO operating conditions. In a presently preferred embodiment, ECI will
conduct weekly or daily trials by simply adopting the actual winning bids
as if they were ECI bids. This objective is to demonstrate and test the
ability of buildings to participate in these markets and to qualify the
building portfolio to participate subsequently in other markets.

[0052] The database software will support all Energy Automation functions:
building control & portfolio optimization; scorecard; accounting; and
business/product development.

Building Database 66

[0053] The building database 66 has the following content: energy profile
(daily, seasonal, current; volatility; kWh, kW, therms, Btu; main and
submeter data; and billing data), monitored building and building HVAC
data (provided by a BAS system), mechanical and BAS (type, size, vintage,
available control and telemetry, design capability, communications
protocol), load flexibility (response speed, duration, notice
requirement, load shift magnitude, load shift frequency, load shift cost
(e.g. losses from precooling, tenant discomfort, equipment
wear/tear>>, performance history (accumulate a record of actual
response to actual Energy Automation control, to eventually provide a
"learned" building capability profile over a wide range of conditions),
on-site generation (type, available control, design capability, etc.),
current building equipment status (as updated by building engineers or
continually by monitoring through BAS system), and a library of commands
to commercial buildings. In one embodiment, EnergyConnect will work with
all participants (buildings owners, energy service providers, scheduling
coordinators, etc.) to define a collection of acceptable load shifting
commands, actions, and strategies that are available to Energy Automation
building control and optimization software. Eventually, this collection
will evolve, expand, and automate as EnergyConnect builds and records
experience for a wide range of commercial building character under a wide
range of conditions.

[0056] The market database 55 stores prior portfolio and building
commitments (current and historical bids and awards for BES and RRS, plus
longer term commitments), market price and volatility (LMP and energy
supplier price signals (electric and gas)), transmission congestion
prices (DA, HA, RT (hourly), and RT (6 minute) prices; electric system
conditions), yesterday's conditions (yesterday predicts today, at least
as a start), ancillary services data (DA and RT prices, opportunity cost,
control signals), and utility tariffs (delivery and supply tariffs,
especially as a key driver of demand limiting strategies and as they
constrain the flexibility of buildings to shift load from high to
low-priced hours).

REP Database 52

[0057] The REP Database 52 stores the price or value signals provided by a
building's supplier in lieu of, or to augment, market prices, baseline
building load schedules, as determined by the supplier for its building
customers (these schedules will be modified to reflect Energy Automation
strategies), and adjusted building load schedules, as determined by ECI
and transmitted to REP.

Operations Support Software

[0058] The Energy Automation administration database stores Energy
Automation commands sent and verification of receipt, Energy Automation
receipts and disbursements and the parameters behind them, and
customer/supplier admin information. The scorecard software serves three
functions (1) operational measurement & verification of performance (as a
basis for distribution of revenues and against expected performance, to
improve building database accuracy), (2) off-line analysis and
development of alternative building control strategies (to test and
continually improve the optimization software vs. independent,
non-portfolio building operation), and (3) internal and external
reporting. In regard to the development database, in order to continue
development of the building model and the optimization model, ECI will
need off-line access to some subset of the building, weather, and market
databases.

Customer Building Interface 68

[0059] The customer building interface 68 encompasses several component.
First, the customer building interface 68 comprises the
hardware/software/communications interface between the ECI system and
each building's BAS. The customer building interface 68 also comprises a
graphical user interface that (a) indicates current status of assigned
Energy Automation strategies and commands to a property's BAS, (b)
displays current electric system operations and market conditions,
weather, building, or other information (as necessary to inform building
engineers as to how their buildings are creating value under today's
conditions), and (c) displays and allows updating of ECI's building
database content regarding their properties. The customer building
interface 68 also automates retrieval and capture of BAS data in the
Building Database and encodes building instructions--software that
translates ECI building instructions (from the optimization model) into
commands recognizable by each building's BAS. Inputs include, for
example, standard commands (from building database), optimum portfolio
operation (from optimization model), and optimum building operation (from
optimization model). The customer building interface 68 also receives and
interprets deployment signal--ECI will pass some ISO operating signals
directly through to a building's BAS. For example, an ISO signal to
deploy spinning reserve will require a real-time building response. In
anticipation of such a deployment signal, ECI will have already
transmitted instructions regarding the required building response.

[0060] In one implementation, for a few buildings, this interface is fully
integrated with an existing BAS. This will enable evaluation of screen
shots and other features. For other buildings, a less intrusive GUI, e.g.
web access to an ECI screen, can be provided. In this implementation, ECI
systems will not directly control BAS. One objective of such an
implementation is to determine, with the building engineers, whether and
to what extent ECI systems need to directly control BAS in a full
production system. This means that, for this implementation, building
engineers will have to take actions to implement assigned Energy
Automation strategies. The interface design in this implementation can
facilitate the building engineer's execution of such strategies. An
exception to this is, to test the ability of buildings to participate in
ERCOT ancillary services markets, those buildings will receive ISO
deployment signals. For all buildings in this implementation, the system
will automatically obtain and store key building information via the BAS.

[0061] The following table shows the initial definition of building data
for retrieval through BAS system. Standard commands can either be
universally interpreted by each building's BAS and/or custom to each
building's BAS.

[0062] The electric system markets and operations interface 50 comprises
the REP/QSE interface 53, the market database 55 (which derives ISO
market and operations data, both current and historical, from the APX
market database 56), the REP Database 52, and the weather database 51.

[0063] In regard to the REP/QSE Interface 53, ECI has two alternatives: a
standard ECI-specified

[0064] interface or several REP-specified interfaces. The interface will
transfer expected day-ahead building/portfolio load schedule to ECI and
then transfer ECI-modified schedule back to REP, transfer REP price
signals, if any, to ECI, and provide acknowledgments. In one
implementation, this interface will be a simple, custom designed
interface designed to accommodate participation of a specific office.

[0065] The QSE Interface 54 will be used for ancillary service market
participation. This interface 54 will send ancillary service bids to a
QSE to be forwarded to the ISO 80, receive ancillary service awards, and
receive ISO deployment signals. In one implementation, ECI will test the
ability of a commercial building portfolio to reliably provide ancillary
services to ERCOT. This means that ECI need not send/receive actual BES
and RRS bids/awards. For example, ECI may adopt others' actual winning
bids, and then deploy as if ECI bids/awards. Such operation will far
simplify this QSE interface 54, putting the emphasis on deployment of the
building portfolio. Because of the relatively small magnitude of kW
deployed from a 15-20 building portfolio, the resulting effect on kWh
schedules will probably be too small to show up in ERCOT/QSE/REP
settlement accounting.

[0066] The market database 55 contains historical ISO market and
operations data, from the APX Market Database 56, current BES and RRS bid
and award information (in one implementation, to be adopted from others'
actual winning bids), and a record of ancillary service bids, awards, and
deployments and their associated parameters. With regard to historical
ISO market and operations data, this data would contain day-ahead and RT
hourly energy prices (e.g., last 30 days, current season, same season
from a year earlier), and BES and RRS market price history (same periods
as above). The latter data is needed to develop bids in the BES/RRS Bid
Generator 120. In one implementation, the Bid Generator 120 will simply
adopt others' actual winning bids, so this historical data will not be
needed.

[0067] The REP database 52 contains historical and current
building/portfolio baseline load schedules, as provided by the REP, and
historical and current building/portfolio adjusted load schedules, as
sent to the REP.

[0068] The weather database 51 contains historical weather data (available
from National Climatology Center), such as hourly temperature and
humidity (to match the same periods for which hourly interval meter data
is available and stored in the building database 66) and daily HDD and
CDD data (same periods as above), as well as a 48 hour forecast of
temperature and humidity, by hour (available by internet feed from NWS).

[0069] In one implementation, an integrated design of ECI and APX systems
is performed to minimize development expense until better specification
is available and to better explore mutual, long-term development benefits
including shared resources (programming, NOC, etc.), development of APX
scheduling software, to accommodate customer participation in ISO markets
development, setting the standard for QSE and building interface,
facilitating QSE value-added services, etc., national roll-out of Energy
Automation using APX systems (for example, anticipate and accommodate PJM
programs similar to ERCOT by end of year), and a role for Fulcrum.
Additional issues can be addressed in the implementation. For example, if
an REP is its own QSE, will confidential ECI bid/award data be available
to the affiliated REP or a potential ECI competitor? If a QSE is not an
REP but otherwise performs commercial services in the market, will
confidential ECI bid/award data be compromised? For example, if the QSE
affiliate is bidding into the same market as ECI, will it view ECI bids
and routinely undercut ECI by 1%? Another issue that can be addressed is
to decide whether modified schedules provided directly to a scheduling
entity or instead provided to the supplier for submission to its
scheduling entity? In Texas, this may be a mute point since many REP's
are their own QSE.

Protocols

[0070] EnergyConnect's building control and portfolio optimization
software strives to maximize portfolio benefits (revenue increases,
expense reductions, risk management) while maintaining building comfort.
Protocols, in turn, provide the basis for allocating benefits and risks
within a building portfolio (according to participation in EnergyConnect
products and services) and among market participants (ISO, utility, BAS,
ESP, power marketer, and EnergyConnect). Protocols serve several
purposes. First, they must produce prices that incent customer, ESP, and
utility participation. EnergyConnect programs will develop significant
dollar margins, so both attractive pricing and attractive EnergyConnect
profit margins are achievable. Second, protocols will influence whether
and how competitors enter and share the expense of market development.
Third, protocols will seek recognition and capture of the indirect
benefits of EnergyConnect programs. As EnergyConnect achieves scale in
each market, customers, utilities, and ESPs will realize significant
indirect benefits. For example, when energy price volatility is mitigated
by EnergyConnect programs, risk and risk management expense will diminish
for all market participants. Fourth, protocols will codify direction and
timing of the flow of funds among parties. This will dictate
EnergyConnect's credit risk exposure and working capital requirements.
The protocols will also codify the financial risks borne by each party.

[0071] One can confirm designs and test alternative prototype protocols
for allocating program benefits and risks. Allocation of benefits and
risks takes into consideration: commercial building availability,
building performance capability, actual performance (all as recorded by
the scorecard software), and incremental contribution to portfolio
benefits (as determined by the portfolio optimization software).
Protocols tasks include: specifying protocols (and in form that can be
translated into accounting) and defining associated information
requirements, especially as they affect hardware/software/communications
development (for example, commercial building energy bill monitoring and
savings analysis, commercial building performance measurement and
verification, and revenue disbursement and netting of payments).

Communications, Signal Management, and Building/BAS Interface 68

[0072] The communications, signal management, and building/BAS Interface
68 is software/hardware that handles data transfer among EnergyConnect,
building owners and their BAS systems, scheduling coordinators, energy
service providers and collects data from ISOs, the National Weather
Service, and utilities.

Products and Services

[0073] The EnergyConnect platform enables powerful products and services.
The following "initial" products are targeted to benefit commercial
buildings by reducing energy expense and by reducing the burden on energy
suppliers and energy delivery systems. All of these products and more can
be provided today under already established rules in Texas. Many of these
products can be provided today in the New England, New York,
Mid-Atlantic, and Midwest markets. As these markets continue to develop,
so will EnergyConnect products and services. EnergyConnect products
include capturing energy margins, reduce system or local coincident peak
load, reduce shaping and imbalance energy expense, reduce risk management
expense, reduce ancillary services expense, arbitrage gas/electric
prices, and basic blocking and tackling Reduced energy expenses shows up
immediately in property market values. The value to the building owner of
improved operating profit is typically ten to one, e.g., adding $10,000
to net operating profit increases the value of a property by $100,000.
The value of this incentive to building owners depends on widely varying
tenant arrangements. These products will now be described in more detail.

Capturing Energy Margins

[0074] Capturing energy margins continuously and optimally shifts use to
shoulder and off-peak periods based on day ahead prices, continuously and
optimally shifts use to lower-priced hours dynamically during each day,
or, if market prices are not available, continuously and optimally shifts
use to minimize costs under utility tariff. In other words, capturing
energy margins continuously, optimally, and automatically shifts
time-of-use to lower-priced hours. There are two ways to be paid for this
product: responding to utility tariff (provides direct savings on the
customer power bill) and responding to the ISO provides payment for
service. If the utility bill is reduced, then a customer fee or share of
savings is paid to EnergyConnect. In the case of payments from the ISO,
EnergyConnect receives the entire amount and shares the appropriate
portion with the building customer.

[0075] As the PJM analysis in FIG. 5 indicates, a market program that
clips just the highest prices (that is, that shifts individual customer's
energy use away from a few high-priced hours) can significantly reduce
customers' energy bills. The top line in the figure reflects actual
wholesale energy expense to serve a 1 MW customer at each of the 3,000
PJM LMP points (sorted in descending order). Each succeeding line
reflects the effect of clipping prices at $300, $150, $100, and $50.
EnergyConnect's target markets and customers will benefit especially,
because higher and more volatile prices are characteristic of large
metropolitan areas. Shifting an individual customer's energy use away
from high-priced or high value hours is not the onerous task implied by
most utility tariffs. In contrast to the static pricing historically used
in such tariffs, power supply and delivery economics produce high and
volatile energy costs and prices. Nonetheless, a price clipping strategy
would involve relatively few hours (see FIG. 6).

[0076] Likewise, demand control has disproportionate value on just a few
peak days. As FIG. 7 indicates, customer loads vary across a wide range,
and so electric supply and delivery systems are burdened on relatively
few peak summer days.

[0077] Weather-driven load and market price variability differs from city
to city. For example, Chicago and Dallas experience widely varying summer
weather (see FIG. 8 with respect to Chicago); San Diego and San Francisco
do not.

[0078] As an important corollary, if permitted the freedom to shift
hour-to-hour energy use every day, absent the strictures of an every day
demand charge, a commercial building can create significant economies for
the supply and delivery system. Allowing flexible energy use on other
than the few peak days would not tax either the generation or delivery
systems. FIG. 9 shows that volatile energy costs and prices occur
intra-day, that is, from hour-to-hour within an on-peak window. This
means that commercial buildings need only shift cooling loads
hour-to-hour in order to create significant economies.

[0079] The table in FIG. 10 and graph in FIG. 11 summarize a simulation
performed on a 1 MW commercial office building over three summer months.
The building has a state-of-the-art BAS system and is rigorously
controlled to minimize the electric tariff bill each month. Tariff-based
operation produced a summer bill of $154,000. Under the simulation, the
BAS system instead rigorously controlled the building to minimize the
economic cost of supply and delivery. Relative to the tariff-based
operation, economic operation reduced the cost of supply and delivery by
20-40% over a wide range of assumptions. In one simulation, cost was
reduced $50,000--roughly 1/3rd of the tariff bill. This same simulation
increased the tariff bill by over $15,000. The increase is largely
attributable to increased demand and demand charges on non-peak days and
hours, i.e. days and hours that did not tax either the generation or
delivery systems. The table in FIG. 10 shows the cost reductions that
produced the $50,000 savings. The graph in FIG. 11 provides an example of
summer weekday electric prices and a building pre-cooling strategy
carried out in anticipation of such prices.

[0080] This product can be described as continuously and optimally
shifting building load to lower-priced hours. Initially, EnergyConnect
will target very large cities that have (1) locational marginal prices
(LMP) and deregulated retail markets for electricity or (2) existing
time-of-use or real-time-pricing utility tariffs. EnergyConnect will then
migrate this product to other large cities. Compensation for providing
this service may come from a share of customers' energy savings, as
reflected monthly in their utility or energy service provider (ESP) bill.
There are several market development issues. First, there is a need to
amend utility tariffs so that demand charges discriminate between
coincident and non-coincident peak use. That is, demand charges need not
constrain hourly price-response actions except during peak hours. Second,
ISO's need to extend operation of real-time demand-response programs into
a lower range of prices. EnergyConnect customers will capture their most
significant savings through volume in the frequent $50-100/MWh hours, not
in the increasingly rare $100-1000/MWh hours. Third, EC needs to gain
recognition of real and reactive loss profiles by hour, day-type, and
season. I2r means that distribution losses are much greater weekday
afternoons in the summer when prices are highest. Reactive power losses
also typically peak in those same hours.

Reducing System or Local Coincident Peak Load

[0081] To reduce system or local coincident peak load, individual building
actions in real time reduce system or local loads at times when
increasing coincident load would cause additional costs to be incurred by
energy supply or delivery entities. Certainty and permanence of
reductions are created through portfolios of customers that can more
effectively assure reductions on year ahead or day ahead basis and
dynamically during each day. Reducing system coincident peak load
involves responding as a portfolio to utility and ISO demand reduction
programs. This is significantly more valuable to suppliers than programs
targeted at individual customer demand reductions. Payment for service
varies by program and has maximum value in EnergyConnect target markets.
EnergyConnect receives payment for service and distributes a portion of
the proceeds to the building customer.

[0082] This product can be described as curtailing demand in coincident
peak load periods; in its most basic form, control and shift demand to
mitigate utility tariff charges. With some aggregation of commercial
building load, curtail or shift peak demand into off-peak windows based
on signals from ISO's and utilities. Examples of practical early
applications include the CA Demand Reserve Partnership Program and ISO
demand response programs such as the NYISO's ICAP Special Case Resources
(SCR), Emergency Demand Response Program (EDRP) or Day-Ahead Demand
Response Program (DADRP). Emerging programs, like the CA Demand Reserve
Partnership Program, include many features conducive to commercial load
participation. These features include, for example, aggregation of
building loads (contrasts with historical utility programs requiring
commitment from individual building accounts. The diversity of an
aggregated portfolio enables commitment that an individual building
cannot make.), variable and changeable month by month commitment level
(allows commitment to vary seasonally to reflect changing building energy
uses and use levels), and ad hoc participation (for lesser compensation,
building loads can offer curtailment on an ad hoc voluntary basis without
the burden of an every day obligation).

[0083] NYISO's SCR pays retail electricity customers to provide their load
reduction capability for a specified contract period. Program
participants receive payments in advance for an agreement to curtail
usage during times when the electric grid could be in jeopardy. Based
upon system condition forecasts, participants are notified to curtail
this claimed "capacity," either through the use of on-site generation
and/or reducing electricity consumption to a firm power level. EDRP
allows participants to be paid for reducing their energy consumption upon
notice from the NYISO that an operating reserves deficiency or major
emergency exists. The program is open to interruptible loads or local
"behind-the-fence" generation greater than or equal to 100 kW per zone.
Loads register for the program through Curtailment Service Providers
(CSPs); when called upon, CSPs will be paid for verified load reduction
at the rate of $500/MWhr or real-time zonal locational-based marginal
price (LBMP), whichever is greater. DADRP allows loads, through their
load serving entity, to bid load reduction into the day-ahead energy
market. Load reduction bids are evaluated along with generation supplier
bids as part of the NYISO's Security Constrained Unit Commitment (SCUC)
program. If scheduled through SCUC, loads are paid day-ahead LBMP for the
scheduled demand reduction, and are also paid an incentive (at the
day-ahead LBMP) for any additional load reduction provided in real time.

[0084] With aggregation and some greater sophistication, EnergyConnect can
sell capacity, e.g. as part of the NYISO ICAP Special Case Resource
Program. Participation in utility and ISO programs depends on commercial
load aggregation. These programs are designed for customers able to shed
significant MW for the duration of the super peak period, e.g. 1-5 MW for
3-6 consecutive hours, typically weekday afternoons in the summer. Such
performance is typically not possible out of a single commercial
building, but could be extracted from a 25 MW portfolio of buildings
acting in coordination.

[0085] Compensation for reducing peak load may come from i) share of
customers' utility tariff demand savings or ESP demand charge savings,
ii) utility interruptible program payments, iii) ISO demand-response
program payments, and iv) capacity sales within ISO-sponsored markets.
One market development issue is that utility interruptible programs
provide only a small share of benefits to participating customers.

[0087] This product can be described as follows. EnergyConnect will
immediately provide a building portfolio with the ability 1) to reduce
the utility or energy service provider (ESP) expense and risk of buying
shaped products from the market and 2) to self-manage volume risk and
imbalance price risk. This product complements (does not preclude) other
EC products and services. For example, EC would initially commit its
portfolio to a shape that more closely approximates standard market
products. The energy supplier would then contract on a forward basis,
relying more so on these less expensive standard products. Second, in
actual operation, EnergyConnect would then shift load in response to
hourly prices, creating additional value with no downside risk. See FIGS.
12 and 13 for graphs of load profile versus hour. FIG. 12 shows that it
is expensive to shape energy supply to customer loads. Less liquid hourly
products are

[0088] pricey and risky. FIG. 13 shows that it is even more expensive to
adjust "shape" purchases weekly, daily, and hourly to fit dynamic
customer loads. Default imbalance energy is especially pricey and risky.
Compensation for providing this service may come from a share of
customers' energy and risk management savings. ESPs will facilitate this
product and so will also share in the savings.

[0089] Regarding market development issues, utilities with large,
incumbent customer portfolios can shape supply and manage imbalance more
easily because of the diversity of customers because regional resources
are more or less matched to the utility's load shape and because they
typically own or control significant regional resources. As a corollary,
ESP customer portfolios have less diversity (more volatility) and are
odder-shaped. Moreover, ESPs typically have to buy shaped products at the
margin from generation-controlling utilities. This means there will
likely be strong initial interest in this product from ESPs, especially
those without their own regional generation portfolios and without large
regional customer portfolios. Even a modest EnergyConnect building
portfolio can provide smaller ESP's with the benefit of diversity. A
larger portfolio may have the flexibility to sell shaping/imbalance
products to the energy market.

Reducing Risk Management Expense

[0090] Regarding reducing risk management expense, the revenues derived
from Energy Automation products and services are positively correlated
with customers' volatile energy expenses (both gas and electric), and
thus hedge customers' energy expense risk. Moreover, expectation of
damped energy prices and associated volatility will reduce long-term risk
management expense. Reducing short-term risk management expense shapes
customer load around more liquid wholesale energy blocks and self-manage
weather-driven volume volatility. Less reliance on illiquid hourly energy
markets and less exposure to volatile imbalance energy will reduce
short-term risk premiums. This service to suppliers and ISOs competes
directly with the price currently paid. The cost to supply this service
is a small fraction of current price. In most applications EnergyConnect
is paid directly by the supplier, but in some cases with large building
owners and managers the contract between supplier and building may
reflect the service, and the building customer will pay EnergyConnect.
Regarding reducing long-term risk management expense, expectation of
damped energy prices and associated volatility will reduce long-term risk
management expense. This product differs from short-term risk not only in
time frame, but the cost to supply is an even smaller fraction of current
price.

[0091] Risk management is a significant byproduct of Energy Automation
products and services. In high price/high load months or seasons, more
frequent and more valuable opportunities exist for price-responsive load
shifting, peak demand reduction, and shaping and imbalance energy
savings. This means that the associated Energy Automation revenue (or
savings) is positively correlated with a customer's monthly or seasonal
energy expense, and so provides a natural hedge. This natural hedge is
also intrinsic to other Energy Automation products and services.
Eventually, the more liquid energy markets created by Energy Automation
will damp expected prices and price volatility and thereby reduce the
associated risk premiums incurred by suppliers (and passed on to
customers).

[0092] To the extent energy price volatility is driven by natural gas
prices, Energy Automation provides an additional tool for building owners
and energy service providers to hedge their natural gas exposure. To the
extent energy price volatility is weather-driven, Energy Automation
provides national building owners and national energy service providers
an additional tool for managing energy price risk on a regional portfolio
basis. This results from the weather correlation among cities within
broad regions of the country. FIG. 14 is a table showing metropolitan
city cooling degree day correlation.

[0093] This product can be described as follows. As a byproduct, customers
and suppliers will derive significant financial risk management benefits
from Energy Automation products and services. To the extent not needed by
anyone customer, these benefits are transferable to other building
customers within the portfolio.

Reducing Ancillary Services Expense

[0094] Reducing ancillary services expense reduces load regulation burden
and spinning-reserve burden on the electric system. These products will
initially be sold to ISOs at prices established for delivery of similar
services by generators. EnergyConnect will be paid directly by the ISO.

[0095] Reducing load regulation expense product description: This involves
reducing or eliminating load regulation burden on the electric system.
Control area operators balance generation with ever changing electric
loads. For example, NYISO sends dispatch "basepoint" signals to
generators every 5 minutes. Such signals cause generation to follow the
daily/hourly load profile. NYISO also sends regulation or AGC signals to
"regulating" generators every 6 seconds. Such signals cause generation to
follow minute/second load volatility. This finer control is needed to
meet NERC/NYISO control area performance standards for load/generation
balance and for frequency control. To perform this finer control, NYISO
typically requires flexible regulating capacity equal to 1% of the
customer load. If a customer load is not volatile, then it imposes no
regulation burden on the control area. If customer load volatility can be
controlled to vary opposite the control area load, then that customer is
providing a regulation benefit to the control area. In advance of ISO
recognition of customer-provided regulation service, EnergyConnect will
at least seek relief from regulation charges. This will provide some
savings while demonstrating that customer loads can reliably and
profitably participate in control area regulation services markets.
Compensation for providing this service may come from sharing in avoided
regulation charge.

[0096] One market development issue is gaining ISO recognition of reduced
burden on ISO operation. This is a simple, first step toward setting up
commercial customers as suppliers of regulation services.

Arbitraging Gas/Electric Prices

[0097] By arbitraging gas/electric prices, current very high gas prices
overcome electric inefficiencies in markets and in hours that coal-based
generation is at the margin. This product can be described as follows:
switch HVAC systems between electric and gas supply in order to arbitrage
gas/electric prices. At night, the gas/electric price spread may overcome
the inherent inefficiency of electric supply and merit switching to
electric heating. Switching night-time heating load will make sense when
coal or nuclear generation is at the margin setting electric market
prices. There is a corresponding opportunity to switch electric heating
customers to natural gas during on-peak periods when electric prices are
high. For example, electric prices typically spike during the early
morning load pickup when all the residential set-back thermostats
trigger. Compensation for providing this service may come from sharing of
arbitrage savings. Regarding market development issues, electric heating
at night, when performed on a market scale, would take significant
pressure off the price of natural gas, a premium fuel. The reduced coal
plant cycling would mitigate added environmental emissions. To implement
this service, commercial buildings will typically have to add an electric
heat exchanger to their existing heating systems, and ESPs will have to
augment their gas scheduling operations to accommodate short-term
switching. In the current climate of historically high and volatile gas
prices, ESPs will appreciate the financial risk management value of this
option.

Basic Blocking and Tackling

[0098] Basic blocking and tackling involves rigorous application of
state-of-the-art building automation systems to create additional energy
savings for many customers, as much as 10%, and sets the stage for
Enterprise Energy Automation. Preparatory to providing initial Energy
Automation products and services, EnergyConnect provides services to
assure that customer facilities are doing the basic blocking and tackling
of energy management. They include "tuning" HVAC and BAS equipment to
meet design performance, installing "enterprise" energy reporting
software, upgrading to state-of-the-art BAS, as necessary to execute
Energy Automation strategies and including project finance if preferred,
and controlling energy use against utility tariffs.

[0099] These basic services provide several benefits. First, they create
additional energy savings for many customers, as much as 10%--alone
usually sufficient to justify BAS upgrade. Second, they enable an
enterprise energy solution for national customers, whose facilities exist
in a variety of regulated/deregulated markets. Finally, they provide with
insight into customers' energy equipment and use that is invaluable to
executing Energy Automation. All of these products and services increase
building value--by reducing energy expenses. Value to the building owner
is typically ten to one, e.g. adding a sustainable $10,000 to net
operating profit increases the value of the building by $100,000.

[0100] Compensation for this service may come from a share of the energy
cost savings (from enhanced energy management system performance) as
reflected in the customers' monthly utility or energy service provider
(ESP) bills. This will be a monthly fee or percentage of savings. In
addition, a fee will be charged to the customers for engineering, project
management and program interface if the BAS is upgraded. Fee based
relationships will be developed between EnergyConnect and the various
suppliers of these upgrade services (BAS manufacturers and installing
contractors).

[0101] Regarding market development issues, these services are more
applicable to high cost energy markets (electricity and gas) and to
markets where tariffs support and reward buildings able to control load
hourly (time-of-use rates, peak, super-peak, etc.).

Additional Products and Services

[0102] Additional products and services can be used to provide expansion
and greater profit margins. EnergyConnect can deliver joint products and
services extracted from the building portfolio. Such products and
services include reducing locational marginal price, reducing capacity
reserve margin requirements and expense, selling ancillary services to
the market, reducing capital investment for distribution system growth,
reducing distribution system operating expense, selling shaping and
imbalance services, and controlling distributed generation.

Reducing Locational Marginal Price (LMP)

[0103] The reducing locational marginal price (LMP) product can be
described as shifting energy use to lower-priced hours in local,
transmission constrained market, typically a large metropolitan city,
e.g. New York, Chicago, San Francisco. Additional opportunity during less
frequent, system-wide price spikes. See FIG. 15, which is a graph of load
profile versus hour for a NYC Comm building customer. Compensation for
providing this service may come from negotiated share of estimated
savings, e.g. a fee from BOMA members that recognizes value created by
operation of the Energy Automation System.

[0104] There are several market development issues. These include: i)
customer volume needed for material effect and ii) eventually, this
program will damp prices and price volatility for all customers, so high
prices will lose visibility and customers therefore will no longer see a
benchmark against which to measure savings.

Reducing Capacity Reserve Margin Requirements and Expense

[0105] The product description for reducing capacity reserve margin
requirements and expense is that building groups can internally provide
many of the services and manage many of the risks that capacity reserve
margins are intended to cover. Examples include weather-related load
volatility, load forecast error, and spinning/regulating reserves.

[0106] Reduced operating reserves provide an intriguing example. Operating
reserves include capacity to provide regulation, spinning, and
non-synchronous operating reserves. As an example, for discussion, assume
spinning reserve equal to 3% of load are required on a peak day (i.e.
1,000 MW for largest contingency divided by a 33,000 MW peak load). This
means that at least 3% of a 15% installed capacity reserve margin is
dictated by the need to provide spinning reserves from generating
resources during peak load conditions. One possibility is that a
commercial load portfolio would provide spinning reserve MW's on summer
weekdays equal to 3% of its load and have its reserve margin requirement
dropped to 12%. The second possibility is that the same portfolio would
provide spinning reserve MW's disproportionate to its size, e.g. >3%.
In this case, the portfolio's reserve margin requirement could drop even
further, MW for MW. This is an example, and technical adjustments both up
and down can be made.

Providing Ancillary Services to Market

[0107] In Texas, commercial buildings are now allowed to participate in
ancillary service markets. The specific technical requirements have been
articulated and leeway has been given to scheduling entities regarding
the nature of contractual arrangements. This provides the opportunity to
prove out the ability of commercial building loads to participate
profitably in such markets. Other parts of the country will follow.

[0108] In Texas, "Loads acting as resources" can provide ancillary
services based on the load's available technology, as follows. (1)
Responsive Reserve: requires that an Under Frequency Relay (UFR) he
installed that opens the load feeder breaker on automatic detection of an
under frequency condition. These loads are also required to be manually
interrupted within a 10 minute notice. The load, breaker status, and
relay status must have real-time telemetry to ERCOT (through the QSE)
installed. Loads qualified for the Responsive Reserve market are also
automatically qualified for the Non-Spin market, Replacement and
Balancing Energy Market. (2) Non-Spin Reserve: requires that
interruptible loads be manually interrupted (e.g., opening a circuit
breaker) within 30 minutes notice. The load must also have real-time
telemetry installed. (3) Regulation Up and Down Service: requires that
interruptible loads through automatic controls respond to signals
provided by ERCOT to increase and decrease load while meeting rigorous
performance monitoring criteria. The load must also have real-time
telemetry installed. Loads qualified for Regulation Up and Down service
are also qualified to provide Non-Spinning Reserve, Balancing Energy
Services, and Replacement Reserves. (ERCOT systems do not yet accommodate
loads of this type). (4) Balancing Energy Up: requires that loads be able
to respond through manual or automatic operations to interrupt load
within 10 minutes. The load must also have real-time telemetry installed.
Loads qualifying for Balancing Energy Service are also qualified to
provide Replacement service. If an interruptible load has been awarded an
ancillary service capacity payment, that load may not be bid into the
balancing energy market. (5) Replacement Reserve Service: loads that were
planning to be on-line but not providing any other Ancillary Service.

[0109] In terms of a product description, providing ancillary services to
market provides spinning reserves and load and frequency regulation. Such
services can be reliably provided out of a large, diverse building
portfolio. Such a portfolio will provide 1) size, e.g. NYISO requires
that regulating resources provide at least 5 MW; 2) regulation-capable or
variable speed motor loads; and 3) performance reliability. Nimble
variable speed motors are much better suited to these services than are
cumbersome power plants.

[0110] FIG. 16 is a graph showing governor response and contingency
reserves successfully restored then generation/load balance after the
loss of 2600 MW of generation, and FIG. 17 is a graph showing contingency
reserves provide a coordinated response to a sudden loss of supply. The
source for these graphs is "Technical Issues Related To Retail-Load
Provision Of Ancillary Services, Background Issues Discussion," Brendan
Kirby and Eric Hirst, Feb. 10, 2003.

[0111] Regulation reserves are called on continuously, e.g. in NYISO to
respond to AGC signals transmitted every 6 seconds. A regulating resource
is deemed to have performed if it responds within a bandwidth established
by the min/max AGC signals sent out over the subsequent 30 seconds.
Operation outside this bandwidth results in decreased payments for
service.

[0112] By contrast, spinning reserves are called infrequently due to
random generator outages and other significant ACE excursions. When
called on for a generator outage, they fill the breech, e.g. until more
permanent operating reserves can be brought on-line, e.g. in 10-30
minutes.

[0113] FIG. 18 is a graph showing duration of spinning reserve activation,
FIG. 19 is a graph of PJM 100% spinning reserve activation, and FIG. 20
is a graph of 2001 PJM summer spinning reserve activation. In FIG. 20,
the circle size is equal to the duration of spinning reserve call. The
solid circles are weekdays, and the patterned circles are weekend. "ACE"
means spinning reserve called onto restore ACE, and "unit" means spinning
reserve called for generating unit failure.

[0114] Relatively few spinning reserve calls occur during the priciest
summer hours, e.g. 11 am to 8 pm weekdays. During these periods,
generating units are typically fully loaded and incur a high opportunity
cost to provide spinning reserve service. Commercial building loads would
aim to compete to provide such services in these hours. Instead, most
summer spinning reserve calls occur as generation and load are ramping up
early in the day or ramping down in the evening. During these periods,
many generating units are backed off and readily available to provide
spinning reserve service. Prices are at their lowest. Commercial building
loads, e.g. air conditioning, would typically not be available to compete
in these periods. These same conclusions generally hold year-round, as
shown in the graph of FIGS. 21 and 22.

[0115] EnergyConnect revenues come from service revenues, based on
spinning reserve market prices and opportunity cost payments currently
provided to generators, capacity revenues (i.e. installed capacity is no
longer needed in the peak hours of the year to provide spinning reserves
that are customer supplied, thus reducing the required installed capacity
reserve margins), and energy market price reduction (i.e. the marginal
unit setting market prices will now be a lower priced generating unit).

Reducing Capital Investment for Distribution System Growth

[0116] The "reducing capital investment for distribution system growth"
product can be described as eliminating or deferring capital improvements
to distribution system by controlling coincident peak load growth, by
reducing load uncertainty, and by responding to distribution system
contingencies. A commercial building portfolio--by responding to
contingencies or restoring contingency margin--may be able to reduce the
number of contingencies that distribution system planners currently
consider in order to maintain delivery reliability. This translates into
reduced or deferred capital expenditures.

[0117] The following table relates to a Consolidated Edison Case Study and
is discussed below.

[0118] Con Ed has distribution assets of $8.5 billion and spends over $400
million (5%) each year for growth/reliability and replacement. The peak
growth rate, 1994-2002, has been 2%, although it appears to have
flattened in recent years. The energy growth rate, 1994-2002, has been a
negative 2%. Revenue has also declined slightly over the same period.
Commercial revenue comprises 60% of Con Ed revenue and has declined
approximately 3% per year.

[0119] As announced on Jun. 3, 2003, Consolidated Edison Company of New
York, Inc.--(Con Edison) is investing $522 million this year in upgrades
to its electric delivery system for the summer. "These upgrades and
improvements reflect Con Edison's commitment to continuing to provide the
most reliable electric delivery service in the country," said Lou Rana,
senior vice president of electric operations for Con Edison. Industry
analysts have rated Con Edison as the leading electric utility for
reliability, and the company is ranked 10 times more reliable than the
national average. With energy supplies continuing to be tight, however,
company officials encouraged customers to use energy wisely. The company
said the more than a half-billion dollars in improvements this year would
help maintain reliable service delivery to the company's 3.1 million
business and residential customers in its service area of New York City
and Westchester County. The upgrades and improvements include $328
million on the distribution system, including $65 million for upgrades to
cables and transformers, $20 million on transmission upgrades, $174
million on substation installation and circuit breakers, 158 miles of
underground and aerial feeder cables replaced, 345 thermally sensitive
cable joints replaced, 211 new transformers installed, and 20 electrical
(4 kV) unit substations enhanced and upgraded.

[0120] For discussion of the Con Ed analysis, it is assumed that (1) 80%
or $325 million of annual capital expenditures are driven by
growth/reliability; and 60% of that $325 million is driven by commercial
customer growth, (2) a commercial building EEA portfolio of 1000 MW would
allow Con Ed to remove one level of design contingency on related
distribution facilities and thereby reduce capital spending, and (3) a
commercial building portfolio of 1000 MW could drop its coincident peak
load by 20% (achieved in stages over 3 years) and thereby offset 1-2
years growth on the rest of the Con Ed system. 20%×1,000 MW of
commercial load=200 MW. 1-2% growth×[10,000 total load 1,000 of
commercial load]=90-180 MW. 200/90=2.2 years, 200/180=1.1 years. This
translates into $325-650 million, spread over three years or
$100-$200,000 per 1 MW customer per year.

[0121] One market development issues is aggregating local loads sufficient
to affect the magnitude and timing of specific local substation and
distribution system replacement and/or expansion. Con Ed lent credence to
this Energy Automation product in July 2003 when it announced it was
soliciting bids to reduce peak loads on specifically identified, local
distribution busses.

[0122] As reported, "Consolidated Edison Company of New York, Inc. (Con
Edison) announced today that it has issued a Request For Proposals (RFP)
seeking qualified respondents to administer a program aimed at reducing
electricity use during peak periods by 125 megawatts over five years
beginning May 1, 2004. A reduction in peak energy use of 125 megawatts
would represent saving the energy required to power 125,000 homes. The
company is seeking to achieve these energy-use reductions in selected
neighborhoods throughout its service area. Over the past several years,
we have seen power use throughout our service area growing. Supply,
however, has remained relatively unchanged. At the same time, energy use
in certain neighborhoods has increased at a faster pace than in others.
That growth has necessitated electric delivery improvements in those
communities sooner than planned, said Stephen F. Wood, vice president of
engineering services for Con Edison."

[0123] In this first-of-a-kind program, Con Ed is recognizing the value of
peak load reduction to reduce 1) generating capacity expense, 2)
transmission capital expenditures, and 3) distribution capital
expenditures. The initial program is looking for "permanent reductions"
and so favors technologies such as on-site generation or storage over
BAS.

Reducing Distribution System Operating Expense

[0124] The "reducing distribution system operating expense" product can be
described as follows. Gas and electric distribution systems in large
cities are complex to build and complex to operate. For example, the
underground transmission systems into city centers provide significant
capacitance--a benefit during the day, a cause of high voltage at night.
Night-time commercial building motor loads would greatly benefit electric
system operators, even more so if it could be "dispatched" by
distribution system operators. As another example, distribution system
operators--both gas and electric--could take advantage of the ability to
switch commercial heating load between electric and gas supply in order
to i) control short-term electric or gas distribution loading; ii) clip
system load spikes or slow ramping requirements; or iii) provide gas
storage.

[0126] The "selling shaping and imbalance services" product can be
described as selling imbalance and shaping services to other building
customers and to other energy service providers out of a large commercial
building portfolio. This service follows from a building portfolio's
ability to modify its own load shape (as discussed earlier under initial
products and services). EnergyConnect will immediately provide a building
portfolio with the ability 1) to reduce the utility or energy service
provider (ESP) expense and risk of buying shaped products from the market
and 2) to self-manage volume risk and imbalance price risk. As the
portfolio develops, some buildings will be able to overcompensate--that
is, shift energy use sufficiently to also provide shaping and imbalance
to other buildings with less flexibility. In terms of market development
issues, efficient development calls for adding these "other buildings" to
the EnergyConnect portfolio in order to forecast need and value with
greater certainty and to reduce transaction costs.

Controlling Distributed Generation

[0127] The "controlling distributed generation" product can be described
as follows. It is a natural extension for EnergyConnect systems to
integrate commercial building and others' on-site generation with
electric system markets and operations. Such on-site generation is more
valuable as part of an EnergyConnect building portfolio than if
considered as a stand-alone resource. For example, on-site generation (1)
provides additional benefit to the commercial building portfolio (For
example, with on-site generation acting in reserve, a building portfolio
can commit more of its capability to ISO markets. That is, the building
portfolio will hold fewer buildings in reserve to cover possible, but
improbable significant day-ahead or real-time non-performance. On-site
generation can also serve to cap a building portfolio's exposure to the
market in the event of non-performance) and (2) derives additional
benefit from the commercial building portfolio (For example, on-site
generators, augmented by the commercial building portfolio, can function
like more sophisticated generators. This creates opportunities to
participate more often and in more lucrative markets). Regarding market
development issues, over time, EnergyConnect programs will mitigate or
even eliminate energy price spikes. Such spikes are a significant part of
on-site generation profit expectations. Instead, EnergyConnect will
provide alternative revenue sources for this generation.

Long Term Option Value

[0128] There are several long-term option values that can be provided with
Enterprise Energy Automation. These long-term option values include
expansion into world markets (see Jones Lang LaSalle map of megacities);
provide testing ground for extension of these capabilities to smaller
commercial and industrial customers (technology improvements,
understanding of cost/benefit, and other meaningful intelligence);
technology introduced for these purposes has other uses, none of which
could support the cost on its own; provides customers with understanding
of supply side competitive issues--further enhancing negotiating
position; capturing "free riders" through enhanced capabilities in market
structuring, regulatory management, and legislative management; platform
for integration of distributed resources with electric/gas system
planning and operations; platform for fuel cell entry (natural additions
to support additional market power, access to Federal support funds
associated with developing hydrogen as a permanent energy source,
solution to new Chicago back-up rules--solves space, noise, and pollution
problems).

[0130] Because transmission bottlenecks impede access to regional
generation, high and volatile energy prices persist in very large cities.
For example, in New York City, transmission congestion imposes a
significant premium on top of energy prices available elsewhere in the
state. FIG. 23 is a graph showing that transmission congestion into New
York City is significant and volatile.

[0131] Another example is in high-priced locations in PJM, the frequency
of high prices has grown steadily, despite the construction of new
generation. The chart in FIG. 24 captures five years of summer period
history. There is no indication of price mitigation in these locations.
Moreover, as the PJM analysis in FIG. 25 indicates, clipping prices and
reducing volatility through Energy Automation appreciably reduces energy
bills. In FIG. 25, the top line reflects actual wholesale energy expense
to serve a 1 MW customer at each of the ˜3,000 PJM LMP points
(sorted in descending order). Each succeeding line reflects the effect of
clipping prices at $300, $150, $100, and $50.

Additional Products Provide Greater Profit Margins

[0132] A significant number of additional products have been developed and
other are under development. All leverage the base investment. In each
market, a different sequence of introduction will be appropriate.
EnergyConnect extracts and sells many of these products as a composite of
contributions of the entire building portfolio in each market. Some of
these products are selling ancillary services to the market, selling
peaking capacity equivalent to the market, reducing distribution system
capital and operating expenses, arbitraging gas/electric prices,
providing electric/gas distribution system control, selling imbalance
services, selling load-shedding services, selling frequency control
services, and controlling distributed generation.

[0133] There can also be extension within existing metropolitan areas. As
a large and flexible building portfolio, EnergyConnect will have the
ability to address emerging market issues such as providing
intra-portfolio markets for service reliability, improving efficiency and
environmental performance of baseload generation, relegating old,
inefficient local generation to back-up status, reducing need for
expensive transmission upgrades into congested metropolitan areas,
improving tenant satisfaction and building rentability, integrating
distributed resources with electric/gas system planning and operations,
and providing platform for fuel cell entry into large metropolitan areas.

Scale Provides Far More than Bargaining Power

[0134] Scale benefits EnergyConnect in four ways. First, services are more
flexibly carved out of a portfolio--a building portfolio with diverse
designs, operating requirements, and capabilities can better match up to
one or several of EnergyConnect's profit sources than can a single
building. Second, performance reliability meets ISO and utility operating
standards--again, an advantage of a portfolio over an individual
building, e.g. in meeting strict performance requirements related to ISO
ancillary services. Third, learning curve advantages in a rapidly
developing market--a large market share means EnergyConnect will learn
more quickly than the competition. Fourth, bargaining power, especially
to affect the scope and pace of market development--a portfolio provides
the ISO or utilities with 1) a critical mass around which they are
willing to invest their own resources and 2) greater long-term assurance
of availability and stability of customer participation which are
critical for long-term resource adequacy decisions.

[0135] Building diversity comes in many forms: user sensitivities,
specific location, scope and time of energy use, motor load, vintage
construction, design and efficiency of heating and cooling systems,
control sophistication, owner and manager business philosophies, etc.
This means that buildings are not equally suited to participate in any
one program or market on any given day. Also, a building's suitability
for a particular service can differ by season or evolve over time.

[0136] As stated by William L. Massey, FERC Commissioner, on Sep. 26,
2002, "a robust demand response is largely absent from electricity
markets, yet it is an important means of moderating prices. Fortunately,
getting a level of demand response sufficient to counteract price run ups
is not insurmountable. Studies indicate that we need only about 5 to 10%
of demand to be effective. I believe that good market operation will
require this. Demand responsiveness, when developed, can also be an
important factor in determining generation and transmission adequacy and
in congestion management."

[0137] FERC and state regulatory bodies encourage demand response through
a variety of market and institutional measures. Accelerated application
of LMP will create price signals for the value of energy and services at
different locations and times. Biddable demand reductions, interruptible
load, real-time pricing, and other load management programs will be
instrumental in achieving resource adequacy. Customer participation in
ancillary service markets will free generation resources for other
purposes. Customer participation will mitigate generation market power
for which there is otherwise no easy solution.

[0138] Demand participation in power markets provides greatest value in
transmission constrained metropolitan areas--EnergyConnect's target
market. Large metropolitan areas have not benefited from the recent
generation construction boom. Generation construction is incredibly
difficult and costly in metropolitan areas, and transmission bottlenecks
impede access to remote generation. Customer participation and other
distributed resources are the long-term solution in such metropolitan
areas.

[0139] The forgoing detailed description has described only a few of the
many possible implementations of the present invention. For this reason,
this detailed description is intended by way of illustration, and not by
way of limitation. It is only the following claims, including all
equivalents, that are intended to define the scope of this invention.